Tapered annual allowance: worked examples for 2025/26 and 2026/27

The tapered annual allowance shrinks the £60,000 standard allowance for higher earners. It runs off two income tests and a halving rule, so once you have the right year’s thresholds the arithmetic is quick. The thresholds are the catch. They have moved twice since 2020, so a worked example is only as good as the year it’s run against. The four cases below are ones our calculator is checked against on every change.

The rule (2023/24 onwards)

The member has to fail both gates before the taper bites. Threshold income — net income after the specified relief-at-source deduction and relevant sacrificed-pay addback — has to exceed £200,000. Adjusted income restores specified contribution relief and adds pension input less member contributions. Relief-at-source contributions are not added again. Both tests deduct relevant taxable lump-sum death benefits. Adjusted income must exceed £260,000 too; otherwise taper does not reduce the ordinary £60,000 allowance. Meet both income conditions and the allowance drops by £1 for every £2 of adjusted income above £260,000, down to a floor of £10,000. The floor is reached at £360,000 of adjusted income.

PTM057100 · FA 2004 s.228ZA

Example 1 — a partial taper (2025/26)

Take Priya. Her adjusted income is £280,000, her pension input for the year is £55,000, and her threshold income is comfortably over its gate — so the taper applies.

She’s £20,000 over the £260,000 line, and that halves to a £10,000 reduction — so her allowance is £50,000. Her £55,000 input clears it by £5,000, and that excess is taxed at her marginal rate. As an additional-rate taxpayer, that’s £2,250.

Example 2 — all the way to the floor (2025/26)

Now push the income higher. Marcus has adjusted income of £380,000. The raw reduction would wipe his allowance out completely — but it can’t fall below the £10,000 floor.

Anyone above £360,000 of adjusted income lands on the same £10,000 allowance; earning more makes no further difference. Marcus pays in £15,000, so he’s £5,000 over, and the charge is £2,250.

Example 3 — the taper meets carry forward (2025/26)

Carry forward rescues a lot of these cases. Elena has adjusted income of £300,000, which gives her a £40,000 tapered allowance, and she’s got unused allowance sitting in two earlier years.

Here’s the bit that catches people out: carry forward stacks on top of the tapered allowance — it never puts the £60,000 back. So it’s £40,000 tapered plus £17,000 brought forward, giving £57,000 of room. Her £58,000 input is still £1,000 over even after that, so there’s a £450 charge. The order it all gets used in — current year first, then the oldest year next — is worked through in taper and carry forward together.

PTM057100 (taper) · PTM055100 (carry forward) — figures engine-computed against the 2025/26 config

2026/27: the same arithmetic

The 2026/27 tax year began on 6 April 2026. The four taper parameters (threshold income £200,000, adjusted income £260,000, the £10,000 floor and the £60,000 standard allowance) all carry straight over into the 2026/27 config. The same inputs give the same answers, and Elena’s £300,000 case lands on a £40,000 tapered allowance in 2026/27 too — that’s the worked case in that article. On the calculator itself, the title and live example roll to the current year on their own: the year stamp comes from the engine’s latest config, so the page can never quote a year that’s ahead of the numbers behind it.

Why 2022/23 is different

Carry forward reaches three years back. For 2025/26 that still includes 2022/23, when the rules weren’t the same; for 2026/27 the window is 2023/24–2025/26, all on today’s figures. In 2022/23 the standard allowance was £40,000, the taper started at £240,000 of adjusted income, and the floor was £4,000. Same shape, different numbers:

A £22,000 input sits comfortably inside the £35,000 allowance, so there’s no charge — and £13,000 of unused allowance is left to carry into the next three years. The key point: that £13,000 is measured against the £35,000 the member actually had that year, not the £40,000 standard allowance for that year (still less today’s £60,000).

The mistake to avoid

The expensive one is working out a prior year’s unused allowance against the £60,000 figure when the member was tapered — or on the old £40,000 allowance — back then too. A £300,000 income this year does not establish the position in 2023/24, 2024/25 or 2025/26: run both income tests for each of those years. Where a year was tapered, its unused allowance is whatever was left of that year’s own tapered figure — which may be little or nothing — not £60,000 minus contributions. The other one to watch is the threshold-income gate: at or below £200,000 of threshold income there’s no taper at all, whatever the adjusted income. So anything that pulls threshold income under that line — a personal contribution, say — can switch the taper off entirely.

You can run any of these on your own figures with the tapered annual allowance calculator and the carry forward calculator — each prior year is taken at its own year’s config.

PTM057100 · PTM055100 · PTM055200 (prior-year unused measured against that year’s tapered allowance)